True or False

______1. Productivity is the output produced by a unit of factor input during a given span of time.

______2. The theory of production describes the functional relationships of output and economic resources, assuming

these are fixed size.

______3. Improvement in productivity can be seen if the ratio of output is input increases, since a unit of input can

produce more, or the same output.

______4. A production function illustrates the varied combinations of inputs at the same level of plant capacity.

______5. Cost minimization is producing output at the lowest possible cost.

______6. The law of diminishing returns describes the tendency at some point, for each succeeding addition to

output, to become smaller as the firm adds successive units of variable input to some fixed inputs.

______7. An isoquant map contains infinite combinations of resource inputs that the same budget can purchase given

constant prices.

______8. The AP and MP of a production function may shift downward or upward, simply because the overall

productivity level of that firm may also change.

______9. Computers and computerized machineries are a means of improving overall efficiency by utilizing

resource-saving technology.

______10. Output yielded from the last unit of added input is marginal product.

Multiple Choice

______1. Total product continues to increase despite a decrease in the marginal product when ____.

a. MP is already negativec. the resource mix changes

b. AP continues to increased. MP is still positive

______2. The law of diminishing returns is due to _____________

a. increasing resources c. changing resources efficiency

b. resource limitations d. changing resource mix

______3. Increasing one factor input without changing the other results to _______

a. return to scale b. diminishing returns c. hierarchy of isoquants d. hierarchy of cost

______4. The change in marginal rate of substitution along the isoquant is due to _______

a. decreasing efficiency of additional resources c. increasing efficiency of additional resources

b. increasing efficiency of less resources d. changing efficiency of a resource relative to another

______5. A hierarchy of isoquants implies ____________.

a. changing level of output c. diminishing returns

b. changing level of resource inputs d. return to scale

______6. A hierarchy of isocost implies ____________.

a. changing budget c. changing input prices

b. changing input prices d. all of the foregoing

______7. The least-combination is the ___________.

a. lowest budget point along the isoquant c. lowest budget point along the isocost

b. lowest budget point below the isoquant d. none of the foregoing

______8. Cheaper labor input than capital input results in more use of the former as a least-cost mix because ______.

a. more labor substituted for capital c. less budget for labor input in place of capital

b. less capital used d. more labor inputs purchased

______9. If one unit of labor can buy five units of capital, how many units of labor can one unit of capital buy? a. 0.20 b. 0.50 c. 0.40 d. 0.60

______10. When returns to scale is decreasing, total output __________

a. increases b. decreases c. does not change d. it depends